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The combination of falling
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expansionary cycle |
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aggregate |
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liquidity trap |
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stagflation |
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- The phenomenon that interest rates may be so low that increases in the money supply will have no impact on aggregate demand is called: monetary incapacitation. none of the other answers are correct the sterilization of money. the horizontality of demand. the liquidity trap.Assume the Country C’s economy is in recession: Country C implements a combination of expansionary fiscal and monetary policy. In the absence of complete crowding out what will be the effect on Aggregate demand, price level and interest rates in country C.According to the model of aggregate demand and supply, in the long run an increase in the money supply would cause: a) Prices and outputs to fall b) Prices to fall and outputs to rise c) Prices to rise and outputs to fall d) Prices to rise and outputs to remain unchanged e) None of the above
- The central bank of Wakanda is tasked with providing the nation with expansionary polcies to help combat severe Wakandian unemployment following the war. As a central bank it has multiple tools they can use to boost aggregate demand. List three of these and describe each of them using one sentence.Critically examine the money targeting policy by the central bank in aggregate demand aggregate supply framework?Supply-side policy tools to deal with stagflation include: Group of answer choices A decrease in the discount rate. A reduction in tax rates. An increase in the reserve requirement. A reduction in government spending.
- Consider the figure below. The situation in Trombli is characterized by SRAS1 and AD1 when there is an increase in the money supply shifting the short-run aggregate supply curve to SRAS2. This will create __________ in the economy. a. stagflationary pressure b. a depression c. inflationary pressure d. recessionary pressureIf the aggregate demand parameter a in the IS curve increases, and the central bankwishes to stabilize output at potential, it should:(a) Raise the nominal interest rate.(b) Lower the nominal interest rate.(c) Buy government bonds.(d) Expand the money supply.(e) None of the above.The amount of inflation caused by expansionary monetary policy depends on the slope of the aggregate supply curve. True False
- Suppose that government spending is increased at the same time when an autonomous monetary policy tightening occurs. What will happen to the position of the aggregate demand curve?Which of the following will block an increase in the money supply from increasing real GDP (presumably to fight a recession)? Group of answer choices A) A situation in which business investment is negatively related to the interest rates. B) A situation in which the money demand curve is negatively sloping. C) A situation in which an increase in money supply causes a decrease in interest rates. D) A situation in which Aggregate Demand is negatively sloping. E) A situation in which business investment is completely insensitive to interest rate changes.According to the Liquidity Preferences Model, these are the expected first impact (short run) coming from an increase of Money Supply, EXCEPT: Question 4 options: Increase in Demand for Bonds. Increase in Money in circulation Decrease in Nominal Interest Rates Increase in economic activity.
